Childcare costs peaked in 2020 as the COVID-19 pandemic hit, but care hasn’t been affordable for many families that need it over the last decade. According to the Department of Health and Human Services, childcare is affordable if it costs households no more than 7% of their income.
The average cost of childcare was not affordable for families making less than $75,000. Childcare was not affordable in 2021 for the average multi-racial, Black, or Native American family either, taking up nearly 9% of the average income for each of these groups.
As part of the economic response to the pandemic, the American Rescue Plan Act of 2021 temporarily increased the size of the existing child tax credit, made it refundable, and gave families the option of receiving the credit in monthly installments throughout the year.
The child tax credit is based on household income and the number of dependent children. The American Rescue Plan increased credit from $2,000 to $3,000 per child older than six and $3,600 per younger child. The plan also raised the age limit of eligible children from 16 to 17 years old.
The number of children in need of paid care decreased during the pandemic and is still below pre-pandemic levels.
The number of children under age 14 in paid childcare declined from 12.2 million in 2019 to 10 million in 2020, a decrease of 18%. At the same time, more parents began working from home. About 16.7% of all children 14 and younger were enrolled in paid childcare services in 2020.
In 2019, 40% of children under age six were cared for solely by their parents, according to the most recent data from the Education Department. About a third went to a childcare center.
Private preschool, daycare at a private center, or paid in-home care are considered paid childcare by the government.
About 25% of families with children pay for childcare as of 2021.
How docosts for childcare vary?
Nationally, the average family paying for childcare spent 7% of its income on the service in 2021, down from 7.5% in 2020.
Families who earn more also spend more on childcare. In 2021, households making $20,000 or less spent an average of $4,700 on childcare, or about 12.9% of household income. In contrast, households making $100,000 or more spent an average of $9,100 on childcare, or about 5.1% of their income.
The average cost of childcare for families making less than $75,000 was greater than 7% of household income. The most recent Census data shows about 43% of families with children earn less than that annually. The median household income for families with children was $85,933.
Low-income families are more likely to be cost-burdened by childcare.
South Carolina families spent an average of 10.5% of family income on childcare in 2021, the highest of all states. On average, families in twenty states spend more than 7% of their income on childcare.
Some states like Vermont, Florida, and Washington, DC have universal public pre-K programs where every preschool-aged child can enroll, helping limit childcare costs for families with young children. Other states have public preschool programs but with funding limitations.
Families with children under five spent more money on care than families with elementary-aged and high school-aged children. This trend has been consistent for the last decade. The average family whose youngest child is preschool-aged spent $8,200 on care, compared to an average of $4,700 per family whose youngest child is elementary school-aged.